Residential Status

Residential Status under FEMA, 1999

The definition of “person resident in India” is different in FEMA as compared to Income-tax Act, 1961.

As per FEMA, any person will be a person resident in India if his stay in India during the preceding financial year is more than 182 days. However, there are certain exceptions which are us under:

For a few examples of residential status as per FEMA under various scenarios for person leaving India, download the file 

  • We can conclude that as per FEMA the residential status is determined on the intention of the person to stay or leave the country.

  • “Person resident outside India” means a person who is not a resident in India;

  • An Indian citizen residing outside India is generally known as NRI. NRI status is legally defined under Act and FEMA for applicability of respective laws. However, in some cases there may be variations from general definitions.

Explanation:

 

  • The residential status of a person leaving India will be determined as under:
    If a person leaves India for the purpose of employment, business or for any other purpose that indicates his intention to stay outside India for an uncertain period; then he becomes a person resident outside India from the day he leaves India for such purpose.
     

  • The residential status of a person returning to India will be determined as under:
    If a person comes to India for the purpose of employment, business or for any other purpose that indicates his intention to stay in India for an uncertain period; then he becomes a person resident in India from the day he comes to India for such purpose.

 

Under FEMA, stay for a period of 182 days is also stated. However, it shall be noted that the residential status of a person is primarily determined basis the intention of the person to stay in India.

Person of Indian Origin

PIO is not defined by FEMA. However, RBI in its various FEMA notifications has defined PIO.

In general, PIO means a citizen of any country (other than that of specified countries), if:

  1. he has at any time held an Indian passport or

  2. he or his parents or any of his grandparents were citizens of India by virtue of the Constitution of India or the Citizenship Act, 1955

  3. The person is a spouse of an Indian citizen or a person referred to in (1) or (2) above.

 

Further, each FEMA notification has specifically restricted transactions by PIO residing in specified countries. Some of such restrictions are:

  • Restriction on Acquisition or transfer of immovable property: As per the notification pertaining to acquisition or transfer of immovable property in India Citizens of Bangladesh, Pakistan, Sri Lanka, Afghanistan, China, Nepal, Iran, Bhutan, Macau and Hong Kong are not permitted to acquire or transfer immovable property.

  • Restriction on establishing a Branch/ Liaison/ Project office: No entity or person, being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong and Macau shall establish in India, a branch / liaison / project office or any other place of business without the prior permission of the RBI.

 

Overseas Citizen of India

 

The Constitution of India does not allow holding dual citizenship i.e. Indian citizenship and citizenship of a foreign country simultaneously.

 

A foreign national is eligible for registration of OCI

  • who was eligible to become a citizen of India on 26.01.1950** or

  • was a citizen of India on or at any time after 26.01.1950 or

  • belonged to a territory that became part of India after 15.08.1947 and his children and grandchildren,

provided his country of citizenship allows dual citizenship in some form or other under the local laws, is eligible for registration as an OCI.

 

Minor children of such person are also eligible for OCI. However, if the applicant had ever been a citizen of Pakistan or Bangladesh, he will not be eligible for OCI.

 

**Any person who, or whose parents or grand-parents were born in India as defined in the Government of India Act, 1935 (as originally enacted), and who was ordinarily residing in any country outside India was eligible to become citizen of India on 26.01.1950. An OCI card holder is eligible to visit India without obtaining a VISA.

Points to Remember:

  • The residential status of a person for a particular FY may vary as per FEMA and Income Tax i.e. a person may be a “resident” person in India as per the Act and a person resident outside India as per FEMA and vice versa. This is due to one major distinction between Income Tax and FEMA provisions, in Income Tax the purpose of stay in India or abroad is not relevant; only the duration of stay is irrelevant.

  • The scheme of PIO card is no more in existence. However, as per Press Note No 7/2015 of Ministry of Finance, “Person of Indian Origin” cardholders registered as such shall be deemed to be “overseas Citizen of India” cardholders.

Frequently asked questions

What is an Overseas Corporate Body?


OCB means a company, partnership firm, society and other corporate body owned directly or indirectly to the extent of at least sixty per cent by NRIs and includes overseas trust in which not less than sixty per cent beneficial interest is held by NRIs directly or indirectly but irrevocably.




Is it true that NRI status is accorded to Resident students going abroad for studies?


Yes. It is true. It is observed that when students leave India for taking up a course of specified duration, such stay outside India exceeds the period officially intended. While taking up studies, or further advance courses, students may have to take up job or seek scholarship to supplement income to meet their financial requirements abroad. As students have to earn and learn, their stay for educational purposes gets prolonged than what is intended when leaving India. It is clear that on both counts viz. their stay outside India for more than 182 days in the preceding FY and their intention to stay outside India for an uncertain period when they go abroad for their studies; they can be treated as NRIs.





 

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